PLN tries to expedite negotiations with Paiton
Wednesday, June 20 2001 - 02:35 AM WIB
PLN president Eddie Widiono Suwono said that his company was trying to expedite the negotiation so that the second interim agreement with PEC could be signed before the convening of the special session of the People's Consultative Assembly (MPR) in August.
"If it is completed before the convening of the special session, it will be very good. But if it cannot, then we will continue to negotiate," Eddie said.
He noted that if negotiations with Paiton could not be completed before August, it would be very likely that PLN and Paiton would have to start the negotiation from the beginning when a new government is established following the special session.
Eddie said that negotiations with Paiton would continue despite lawsuit from PLN labor union, that demanded PLN and Paiton drop their power purchase agreement and also interim agreement, both the union considered to have sent PLN into financial difficulties.
Eddie noted that his party would continue to negotiate with Paiton and reached a compromise over electricity prices. If PLN stopped negotiations, it would likely sent Paiton into default, which would eventually result in various lawsuits from Paiton investors and also from PLN.
"We avoid Paiton going into default because it will result in various lawsuits from both parties," Eddie said.
The best way for both parties would be continuing the negotiations and reach a compromise over the electricity prices.
Eddie said Paiton had shown its good will by agreeing to reduce its electricity prices from 7 U.S. cents per kilowatt per hour (kWh) to 5.4 U.S. cents.
"We respect the reduction of prices, so that Paiton is willing to continue the negotiations with PLN," Eddie said.
Meanwhile, PEC president Ronald Landry said that his party was willing to cut its electricity prices to a level of between 5 to 5.5 U.S. cents per kWh over a long-term period of 20 to 30 years.
Landry contended that the prices it offered to PLN would constitute a competitive price for electricity investment in Indonesia over a long-term period.
PLN and PEC signed the first interim agreement, that runs from January through June, 2001, in which PLN is required to pay US$108 million to PEC.
The interim agreement was to supplement the power purchase agreement both parties had signed, in which PLN was required to pay PEC 8 U.S. cents per kWh of electricity Paiton supplied to PLN. But the agreement was put on hold following allegations of corruption, collusion and nepotism.
PLN sells its electricity to its customers at 2.7 U.S. cents per kWh, far below its electricity purchasing price from private power producers, especially Paiton. (*)